Corporate Governance Guidelines
The Board of Directors (the “Board”) of Harbor Florida Bancshares, Inc. (the “Company”) upon the recommendation of its Corporate Governance Committee has adopted the following corporate governance guidelines. These guidelines reflect the Board's commitment to ensuring its effectiveness and enhancing shareholder value over the long-term. The guidelines are subject to future refinement and mediation, as the Board may deem necessary or advisable.
I. Composition and Selection of Board of Directors
Size of the Board
Harbor Florida Bancshares, Inc.’s Articles of Incorporation and Bylaws provide that the Board consists of not less than five nor more than 15 persons, with the exact number determined from time to time by resolution of the Directors. We believe a Board should neither be too small to maintain the needed expertise and independence, nor too large to be efficiently functional. Our general expectation is that our Board will consist of between seven and ten Directors, although we will periodically review the appropriate size and mix of the Board in light of our stated objectives below.
Selection of New Directors
The Board has delegated to the Nominating and Corporate Governance Committee (the “Governance Committee”) the task of identifying, reviewing, and nominating Director candidates for election by the stockholders.
Board Membership Criteria
It is the policy of our Board that Directors should possess high personal and professional ethics, integrity and values, and be committed to representing the long-term interests of the stockholders. The Board at all times should adhere to the standards of independence promulgated by the Nasdaq National Market.
Our Board is also intended to encompass a range of talents, ages, skill, diversity, and expertise (particularly in the areas of accounting, corporate governance, and the financial and related industries) sufficient to provide sound and prudent guidance with respect to the operations and interest of the Company. Our Board members are expected to be able to dedicate the time and resources sufficient to ensure the diligent performance of his or her duties on our behalf.
The Board believes that as a matter of policy at least a majority of the members of our Board should be independent. The Governance Committee is responsible for assessing compliance with this policy on an annual basis. An “independent” director is one who satisfies the independence definition of the Nasdaq Stock Market and who:
• has not been employed by the Company or any of its subsidiaries or affiliates at any time within the previous three years;
• is not an immediate family member of an individual who is, or within the past three years was, an executive officer of the Company or any subsidiary;
• does not accept and has not accepted, and does not have a non-employee member of his or her immediate family who accepts or has accepted, payments (including political contributions) from the Company in excess of $60,000 during the current fiscal year or any of the past three fiscal years, other than payments for board service, travel or related expenses, benefits under a tax-qualified retirement plan or non-discretionary compensation;
• is not, and in the previous three years has not been, an executive (or a member of his or her immediate family has not been employed as an executive) of another entity in which an executive officer of the Company serves on the Compensation Committee;
• is not a partner in, or a controlling shareholder or an executive officer of, any organization to which the Company made, or from which the Company received, payments (other than those arising solely from investments in Company securities) in the current fiscal year or any of the past three fiscal years that exceed the greater of 5% of the recipients consolidated gross revenues for that year, or $200,000;
• is not, and in the previous three years has not been, a partner, former partner or employee of the Company’s outside auditor who worked on the Company’s audit or a member of the immediate family of such persons; and
• does not otherwise have a relationship that the Board determines would interfere with the exercise of independent judgment in carrying out the responsibilities of a Director.
In addition to the above independence requirements relating to all directors, the members of the Audit Committee, Compensation Committee and Governance Committee may not receive, directly or indirectly, any fees from the Company other than those described below under “Board Compensation Policy and Stock Ownership.”
Directors Who Change Their Present Principal Occupation
The Governance Committee will review the appropriateness of continuing board membership of Directors who retire or otherwise change from the principal occupation or background association they held when they were originally invited to join our Board.
The Board also believes that each outside Director should advise the Governance Committee in advance of accepting an invitation to serve as a member on another for-profit board of directors.
Director Term Limits
The Board does not believe it should establish term limits. While term limits could help ensure that there are fresh ideas and viewpoints available to the Board, they hold the disadvantage of losing the contribution of Directors who over time have developed increasing insight into the Company and its operations and therefore provide an increasing contribution to the Board as a whole.
The Board has adopted a retirement policy for its Directors. No individual may be elected or reelected as a Director once he or she reaches age 70. Any Director who turns age 70 while serving as a Director may continue to serve as a Director for the remainder of his or her then current term.
II. Board Compensation and Performance
Board Compensation Policy and Stock Ownership
The Compensation Committee shall have the responsibility for recommending to the entire Board the compensation and benefits for non-employee Directors. It is appropriate for the Compensation Committee to report from time to time to the entire Board on the status of director compensation in relation to peer companies in the Bank and Thrift industries.
An executive officer of the company serving as a member of the Board shall not receive additional compensation for his or her service as Director.
Any proposed changes in director compensation should come at the suggestion of the Compensation Committee, but with full discussion and concurrence by the entire Board. It is the policy of the Board that a portion of director compensation should be in the form of stock or stock based instruments in order to align their interest with those of stockholders. The purchase of stock or using the Deferred Compensation plan also aligns the Directors interest with those of stockholders.
Evaluation of Board Performance
The Governance Committee is responsible for annually reporting to the Board on the overall performance of the Board and each of its major committees. If the Governance Committee so desires, it may be assisted by an outside consultant in making its assessment of the overall performance of the Board and its major committees.
The report should include an evaluation of, among other things, (i) the composition and independence of the Board, (ii) the Board’s access to and review of information from management, (iii) responsiveness of the Board to stockholder concerns, and (iv) maintenance and implementation of these Corporate Governance Guidelines.
Interaction with Institutional Investors, Press, Customers, Etc.
The Board believes that management should speak for the Company. Individual non-management Board members may, from time to time, meet or otherwise communicate with various constituencies that are involved with the Company, but it is expected that these members would do this with the knowledge of management and, in most instances, at the request of management.
III. Meetings of the Board of Directors
Scheduling and Selection of Agenda Items for Board Meetings
The Chairman of the Board, in consultation with other members of the Board, will determine the frequency and length of Board meetings. Regular meetings will generally be held at least once a month. In addition to regularly scheduled meetings, additional unscheduled meetings may be called upon appropriate notice.
The Chairman of the Board and the Chief Executive Officer will establish the agenda for each Board meeting.
Each Director may suggest the inclusion of items for the agenda, or raise at any Board meeting, subjects that are not on the agenda or request the presence of or a report by any member of management.
If a Director has a personal interest in a matter before the Board, the Director shall disclose the interest to the Board, recuse himself or herself from participation in the discussion and shall not vote on the matter.
Board Material and Presentations
Information and data that is important to the understanding of the business and matters to be considered at the Board meeting should be distributed to Board members in writing and, except in rare circumstances, in advance of the meeting.
Participation in Board Meetings
We expect our Board members to prepare for, attend and participate in all Board and applicable committee meetings. Unexcused absences resulting in Directors who attend fewer than 75 percent of regularly scheduled Board and committee meetings in any year may prohibit renomination to the Board.
The Board encourages management to schedule managers to be present at Board meetings who (i) can provide additional insight into the specific matters being discussed because of personal involvement in these areas or (ii) have future potential that management believes should be the given exposure to the Board.
Access to Management
Each Director is encouraged to keep himself informed of the affairs of the Company between Board meetings, through direct contact with members of senior management and each Director will have complete access to any such member of senior management.
Meetings of the Independent Directors
It is the policy of the Board to have at least two meeting sessions for the Independent Directors to review matters concerning the relationship of the Board with the management Directors and other members of senior management and such other matters, as it deems appropriate. The Independent Directors shall not take any formal actions at these meeting, although they may subsequently recommend matters for full consideration by the Board. The Chairman of the Board, if an Independent Director, shall preside. If not, a Lead Independent Director will be appointed to preside at the meetings.
IV. Committees of the Board of Directors
Number of Committees
Our Board will establish committees from time to time to facilitate and assist in the execution of its responsibilities. These committees shall generally address issues that, because of their complexity and technical nature, level of detail and time requirements or because of proper corporate governance principles cannot be adequately addressed at larger Board meetings.
The Company currently has five committees, the Compensation Committee, Credit Committee, ESOP Committee, Audit Committee, and the Governance Committee. There will, from time to time, be occasions on which the Board may want to form a new committee or disband a current committee.
Only Directors meeting the "independence" requirements of the Nasdaq National Market may serve on the Compensation, Audit and Governance Committees. Independent Directors may serve on more than one of the above committees.
Written charters shall be adopted and periodically reviewed by the Committee’s members for each committee, where required and in accordance with applicable law and the requirements of the Nasdaq National Market. The charters for our Compensation, Audit and Governance Committees shall be publicly available on Harbor Federal’s web site for review by stockholders.
Assignment and Term of Service of Committee Members
The Board is responsible for the appointment of committee members and committee chairmen, taking into account the desires of individual members, the recommendations of the Governance Committee and the comments of the Chief Executive Officer. It is expected that each committee chairman will have had previous service on the applicable committee. In making such appointments, the Board shall consider the rotation of committee membership and chairmanship at appropriate intervals, although the Board does not believe that rotation should be mandated as a policy.
Frequency, Length and Attendance of Committee Meetings
The committee chairman, in consultation with the other committee members, will determine the frequency and length of committee meetings. Any Director who is not a member of a particular committee may attend any committee meetings with the concurrence of the committee chairman.
V. Leadership Development
Director Orientation and Continuing Education
The Board and management shall conduct an orientation program for new Directors to thoroughly familiarize them with their duties and liabilities, the Company’s business operations, and risk management of the Company as well as the expected conduct of Directors. The orientation program shall also include a review of the Directors’ fiduciary duties. Any existing Director is invited to attend the orientation program.
Each Director is encouraged to be involved in continuing education on an ongoing basis to enable him or her to more effectively perform his or her duties. Each Director is expected to comply with all applicable Nasdaq National Market continuing education requirements. The Company shall pay all reasonable expenses related to continuing Director education.
The Chief Executive Officer reviews succession planning for senior management positions with the Compensation Committee on an annual basis. The Governance Committee is responsible for the development of policies and principles for succession planning for the Chief Executive Officer, including succession in the event of an emergency.
Last Updated: 01/11/06